The assumptions I made are below:Closing costs are calculated to be 7% of final ARV purchase priceRehab costs are $100/sq ft and $75/sq ftLoan interest is the loan + 10% back to the private money investor (assuming I go that route)Total cost is the MPP + Closing Costs + Rehab CostsTotal Profit is ARV – Total CostOwner receives the MPP (what I would have paid for the house) + Closing Costs (I would have had to pay for these anyway, I could sweeten the deal for myself and offer to split them with the current owner) + Half the profitPrivate Money lender receives their initial loan plus 10% interestI receive the split profit – interest on the rehab loanMy goal was to get the owner as close to their $200k wish in order to convince them to do this less than traditional (and maybe not even possible) way.

As an example, we had a fridge go bad at one property and the warranty company sent a tech out 15 times before finally replacing it.

(The final contract is being sent over next week). 

@Peter Walther @Alexander Szikla @Steven LuttmanI finally got down to the bottom of this.  

I have some capital put to the side, furnishings/decor ready and two cleaning companies already in pocket but need to find an individual/company who is currently subleasing so I can finally get my feet wet.

Finally settle in Northwest Arkansas two year ago and started my real estate investing journey with a house hack. 

I will post about that deal in detail once it is finally finished and stabilized. 

The question is: When it is time for the tenant to finally pay, does the tenant pay us (the new owners), or the old owner whom the debt accumulated under?

Thanks all for the help - went with the architect with a great final result and product and they took care of stamps and all requirements.

Originally posted by @Basit Siddiqi:@Daniel Guest'passive activity' and 'trade or business' aren't mutually exclusive when discussing both items.You can have both a trade or business that is either active or passive.If you have a trade or business and your income is positive, you might be eligible for 199A qualified business income deduction.However, most rentals don't operate at positive taxable income because of depreciations.I finally wrapped my head around this the other day and hadn't had a chance to reply on here yet.